“I don’t like keeping the rate up there either, but at the same time I think it’s a good idea to leave it so people realize that it’s not that we’re trying to give some kind of break for the wealthiest," said Rep. Morgan Griffith (R-Va.). | Manuel Balce Ceneta/AP Photo

Conservatives defy GOP orthodoxy on cutting top tax rate

House conservatives — desperate for a win on tax reform — are open to nixing some newly proposed tax cuts on the wealthy, challenging the GOP’s tax-cuts-for-all orthodoxy.

Multiple House Freedom Caucus members said they’d support maintaining the 39.6 percent tax rate on upper-income earners instead of reducing it to 35 percent under the current GOP plan. President Donald Trump, concerned about Democratic accusations that his tax proposal would be seen as a boon to the wealthy, urged Hill Republicans to consider keeping the current top rate as is to pre-empt those attacks.

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The Freedom Caucus is typically the first to cry foul on any legislation it deems too accommodating to Democrats. And maintaining the top rate runs counter to Republicans’ long-held desires to lower rates on all Americans, no matter their wealth.

Conservatives don’t seem to mind, however — so long as it ensures passage of the party’s main legislative priority.

“If that helps us get it done, I’m for it,” said Rep. Morgan Griffith (R-Va.). “I don’t like keeping the rate up there either, but at the same time I think it’s a good idea to leave it so people realize that it’s not that we’re trying to give some kind of break for the wealthiest.”

Even some of the most conservative members of the House are OK with the idea. When asked whether keeping the top bracket was a nonstarter for him, Rep. Raúl Labrador (R-Idaho) said “absolutely not,” adding, “Any tax reform that gives relief to the majority of Americans is good.”

Rep. Thomas Massie (R-Ky.) agreed: “It wouldn’t be a reason I’d vote against tax reform, let me put it that way…. It wouldn’t be a show-stopper for me.”

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Critics say the GOP tax bill would still benefit the wealthy — even if the top rate stays the same. That’s because of other proposed changes like eliminating the estate tax and alternative minimum tax, which traditionally hit top earners.

The nonpartisan Tax Policy Center found that those in the top 1 percent, earning more than $730,000 per year, would be the biggest winners, receiving half of all the gains in the framework released last week. The bottom 95 percent would see after-tax incomes increase only one-half percent to 1 percent while the top 1 percent would see their take-home pay grow by more than 8 percent.

Republicans have tried to discredit the study, knowing full well that a narrative that their tax plan is a giveaway for the wealthy could kill momentum. Instead, Republicans have been emphasizing rate reductions for the middle class while saying the Tax Policy Center assumed too many details about a bill that has yet to be written.

Freedom Caucus leader Mark Meadows said the ongoing debate over the top rate largely stems from concerns that the tax plan will be framed as a boon to the rich — and he thinks it’s only a matter of time before Republicans decide to keep the current 39.6 percent top rate.

The North Carolina Republican personally favors the rate reduction but said: “There certainly is a political argument to leave the 39.6 percent tax bracket there if nothing more than to address the perception that we would be cutting taxes on the wealthy and increasing it on those middle-income wage earners.”

Meadows does not believe that’s the case, even suggesting that “a top wage earner could very well pay more taxes” at a 35 percent rate if their most prized deductions and credits disappear. But if Republicans keep the top rate, it’s no big deal to him: “My bigger red lines are more on corporate and multinationals and what we do with the estate tax.”

The GOP framework permits the addition of a new top bracket for the richest, something hard-line conservatives say they could also support.

Keeping the current top rate offers a nod to the populist faction within the Republican ranks and also offers a degree of revenue to pay for other cuts.

“I think in the end it’s good,” said Rep. Jim Renacci (R-Ohio), a Ways and Means member.

One other reason conservatives may be more open to the higher rate is because the plan would reduce taxes on most small businesses to 25 percent. Such pass-through entities under current law file tax returns using the individual side of the code, paying as much as 39.6 percent in levies on income. Under the new plan, small-business owners could take advantage of the 25 percent rate instead, which Massie noted.

But some conservatives remain concerned about how the legislation would limit what pass-through income qualifies for the lower business rate compared with wage income that could face the higher 35 percent rate for business owners, or 39.6 percent if that bracket stays on the books. That distinction between business and wage income remains one of the framework’s major uncertainties.

Massie and Rep. Justin Amash (R-Mich.), another conservative rabble-rouser, said their positions would depend on the income threshold for the top bracket. Details on that have not yet been released.

Conservative advocates outside the Capitol have largely reacted positively to the framework, at least what they’ve seen to date.

“What we saw in the framework was enough,” said Jason Pye, FreedomWorks’ vice president for legislative affairs. “But we do need those details, and the sooner the better.”

Passage is paramount.

“I sense that everyone on the right has preferences, but understands that the best bill that can pass the Senate is the goal,” said Grover Norquist, president of Americans for Tax Reform. “We will have a tax cut every year that there is a GOP House and Senate and White House. So fight for growth now. ... win in 2018 and bring forth your list of unmet ‘demands,’ ‘wishes’ and ‘preferences’ then.”